China seeking to exploit American economic woes

The state apparatus of the People's Republic of China continues its tirade against the awarding of the Nobel Peace Prize to jailed democracy activist Liu Xiaobo. On Thursday, an official organ of the ruling Communist Party focused its attack on all of Western civilization whose values are supposedly propagated by the Nobel committee.

China has adopted much Western wisdom since its opening-up. But it refuses to be westernized. The rejuvenation of the Chinese civilization is its dream. The more China learns from the West, the more confident it becomes in its own culture. A rising China with different fundamental principles disturbs the West, which is beleaguered in deep economic woes.

A common line in Chinese commentary is that the economic crisis in America and Europe has revealed the superiority of Beijing's model of state capitalism and "socialism with Chinese characteristics." The Nobel Peace Prize is alleged to be a way for the West to strike back on moral grounds against China's material success. "They hope to harass China's growth, and press China to surrender more economic interests." claimed the Global Times editorial.

Yet, it is actually Beijing that is pressing for the surrender of economic interests around the world. Its state-owned enterprises are flush with cash from the country's trade surplus and unprecedented currency reserves. They are buying up mines and oil fields around the world so they can "import from themselves" the minerals and fuels their growing industries need. And they have again turned their eyes towards America.

China National Offshore Oil Company (CNOOC) announced earlier this week that it will invest $1.08 billion to buy a one-third interest in Chesapeake Energy Corporation's Eagle Ford shale project in Texas. CNOOC will also pay some of Chesapeake’s drilling costs. On the same day, it was announced that Statoil ASA of Norway was also investing in the Eagle Ford site. American business is eager to get foreign funding in the current climate. But from a national perspective, China and Norway are not equivalent partners.

U.S. policy needs to expand domestic energy production to reduce foreign dependence and curtail a financially destabilizing outflow of dollars to oversea suppliers. Statoil is not going to ship oil and gas from Texas back to Norway. It's happy to profit from selling energy in the U.S. market. CNOOC, however, is an arm of the Beijing regime. It's overseas investment is meant to secure energy supplies that can be shipped to China.

Chinese capital will not be expanding Texas production for the benefit of the American economy unless required by U.S. law. The Treasury chairs the Committee on Foreign Investment in the U.S. (CFIUS) which can and should set conditions on CNOOC's investment. Beijing could just be testing the regulatory waters before making larger buys of American resources. Unfortunately, given Treasury's lackadaisical record, CFIUS is unlikely to intervene unless pushed by public opinion and Congress.

In 2005, CNOOC dropped an $18.5 billion bid to take over Unocal Corp. in the face of political opposition. The U.S. House passed a resolution against the CNOOC acquisition of Unocal by a margin of 398-15 on the grounds that "oil and natural gas resources are strategic assets critical to national security and the Nation's economic prosperity." This remains true today and must guide policy.

The state apparatus of the People's Republic of China continues its tirade against the awarding of the Nobel Peace Prize to jailed democracy activist Liu Xiaobo. On Thursday, an official organ of the ruling Communist Party focused its attack on all of Western civilization whose values are supposedly propagated by the Nobel committee.

China has adopted much Western wisdom since its opening-up. But it refuses to be westernized. The rejuvenation of the Chinese civilization is its dream. The more China learns from the West, the more confident it becomes in its own culture. A rising China with different fundamental principles disturbs the West, which is beleaguered in deep economic woes.

A common line in Chinese commentary is that the economic crisis in America and Europe has revealed the superiority of Beijing's model of state capitalism and "socialism with Chinese characteristics." The Nobel Peace Prize is alleged to be a way for the West to strike back on moral grounds against China's material success. "They hope to harass China's growth, and press China to surrender more economic interests." claimed the Global Times editorial.

Yet, it is actually Beijing that is pressing for the surrender of economic interests around the world. Its state-owned enterprises are flush with cash from the country's trade surplus and unprecedented currency reserves. They are buying up mines and oil fields around the world so they can "import from themselves" the minerals and fuels their growing industries need. And they have again turned their eyes towards America.

China National Offshore Oil Company (CNOOC) announced earlier this week that it will invest $1.08 billion to buy a one-third interest in Chesapeake Energy Corporation's Eagle Ford shale project in Texas. CNOOC will also pay some of Chesapeake’s drilling costs. On the same day, it was announced that Statoil ASA of Norway was also investing in the Eagle Ford site. American business is eager to get foreign funding in the current climate. But from a national perspective, China and Norway are not equivalent partners.

U.S. policy needs to expand domestic energy production to reduce foreign dependence and curtail a financially destabilizing outflow of dollars to oversea suppliers. Statoil is not going to ship oil and gas from Texas back to Norway. It's happy to profit from selling energy in the U.S. market. CNOOC, however, is an arm of the Beijing regime. It's overseas investment is meant to secure energy supplies that can be shipped to China.

Chinese capital will not be expanding Texas production for the benefit of the American economy unless required by U.S. law. The Treasury chairs the Committee on Foreign Investment in the U.S. (CFIUS) which can and should set conditions on CNOOC's investment. Beijing could just be testing the regulatory waters before making larger buys of American resources. Unfortunately, given Treasury's lackadaisical record, CFIUS is unlikely to intervene unless pushed by public opinion and Congress.

In 2005, CNOOC dropped an $18.5 billion bid to take over Unocal Corp. in the face of political opposition. The U.S. House passed a resolution against the CNOOC acquisition of Unocal by a margin of 398-15 on the grounds that "oil and natural gas resources are strategic assets critical to national security and the Nation's economic prosperity." This remains true today and must guide policy.